The cryptocurrency market is experiencing a downturn today, with the total market capitalization dropping by 7.68% to $2.27 trillion on March 19.
Bitcoin (BTC), the leading cryptocurrency by market capitalization, is leading the losses by plummeting approximately 7% to around $62,650. Ether (ETH), the native token of Ethereum and the second-largest cryptocurrency by market cap, also suffered a decline of around 8% to $3,200.
Other top cryptocurrencies have performed similarly poorly.
The decline in the crypto market capitalization aligns with the largest single-day outflow ever recorded from Bitcoin exchange-traded funds (ETFs). Grayscale Bitcoin ETF experienced outflows worth $642.5 million on March 18, while Fidelity’s Bitcoin ETF saw its lowest inflow day on record at $5.9 million. This resulted in a net outflow of $154.3 million from spot Bitcoin ETFs.
The slowdown in capital inflows towards Bitcoin ETFs comes ahead of the Federal Open Market Committee meeting on March 20. The future of Bitcoin’s and the crypto market’s 2024 bull run potential depends on the Federal Reserve shifting from tight to loose monetary policy, which is likely if inflation falls below 3% or signs of an economic downturn emerge. If high-interest rates persist, the crypto market rally may falter.
The decline in the crypto market today is part of a broader correction that began on March 14, when it reached a local peak at around $2.72 trillion. Bearish divergence signals emerged ahead of the correction, indicating a weakening price growth. Additionally, the market’s daily Relative Strength Index (RSI) reached excessively high levels before the correction, suggesting overvaluation and leading to reduced trader demand.
Furthermore, the sharp rise in Net Unrealized Profit and Loss (NUPL) alongside Bitcoin’s rapid price increase indicates a prime opportunity for profit-taking. Historical data shows that NUPL values above 0.6 seldom sustain before significant price adjustments occur. Therefore, a noticeable correction is evident in March, with a broader downside move potentially already underway.
The sharp drop in cryptocurrency prices has also triggered a wave of liquidations in the derivatives market, resulting in a swift round of long position liquidations. Over the past day, the cryptocurrency market has witnessed over $182 million in liquidated positions, with long positions accounting for $140 million of the total.
It’s important to note that this article does not provide investment advice or recommendations. All investment and trading decisions involve risks, and readers should conduct their own research before making any decisions.